PhonePe Founder and CEO Sameer Nigam has said that around 96% of UPI transactions in India will continue to remain free despite the introduction of a Merchant Discount Rate (MDR) on certain high-value merchant transactions.
Speaking to ANI, Nigam said the majority of UPI transactions are below ₹2,000 and therefore will not be affected by the new MDR framework. The National Payments Corporation of India (NPCI) has authorised a 0.4% MDR on eligible merchant UPI transactions above ₹2,000.
What Did Sameer Nigam Say?
“Around 96% of transactions will remain free because the majority of UPI transactions in India are below ₹2,000,” Nigam said.
He argued that the limited MDR will generate additional revenue for the payments industry, helping companies recover some of the operational costs associated with running and expanding India’s digital payments infrastructure.
According to Nigam, the payments industry had absorbed substantial costs during the six years when UPI transactions remained MDR-free. He said the new framework could support further investment in the UPI ecosystem.
When Will the New UPI MDR Apply?
The new framework is scheduled to take effect from October 15, 2026. MDR will apply to specified person-to-merchant UPI transactions above ₹2,000, while person-to-person UPI payments will remain free.
For eligible merchant transactions, the MDR is set at 0.4%, with the charge capped at ₹300 for transactions of ₹75,000 and above. The Finance Ministry has clarified that MDR is not a tax collected by the government or NPCI.
Will Customers Have to Pay UPI Charges?
The Finance Ministry has said that the new MDR is a merchant-side payment ecosystem charge and not a direct fee imposed on consumers. UPI payments between individuals will remain free, while payments to merchants up to ₹2,000 will also remain free under the applicable framework.
Nigam said the additional revenue could help payment companies invest in expanding UPI acceptance and digital payment infrastructure, potentially supporting the ecosystem’s long-term sustainability.
